SpaceX long-dated bonds drop below par amid credit market skepticism
SpaceX's newly issued long-dated bonds have fallen sharply below par value, signaling that credit investors are assigning a much higher risk premium to Elon Musk's nearly $3 trillion space venture than equity markets.
Space Exploration Technologies priced $25 billion in debt across five tranches on June 23, just weeks after its initial public offering raised $85.7 billion. Since that debt began trading, longer-dated bonds have experienced a decisive drop in value. As of July 17, the 2056 tranche was trading at 91.07 cents on the dollar, down from an issue price of 99.45 cents.
The sell-off is heavily skewed toward the longest maturities. The 2046 bonds fell to 92.63 cents from 99.93 cents, while the 2036 notes dropped to 95.63 cents from 99.83 cents. The 2033 tranche declined to 97.10 cents from 99.84 cents, and the shortest tenor held up better, with the 2031 bonds slipping to 98.35 cents from 99.92 cents. Coupon rates on the issuance ranged from 5.35% to 6.65%.
Because bond prices and yields move inversely, this price decline means some SpaceX tranches are now yielding north of 7%. For market professionals, this repricing indicates that credit traders do not see an attractive risk-versus-reward profile in the company's debt. The fixed-income market is demanding a significant premium to hold SpaceX paper out to the mid-century mark.
This skepticism stands in stark contrast to the equity market's reception. Following its June 12 IPO, SpaceX's market capitalization quickly vaulted to nearly $3 trillion. Furthermore, the company's S-1 filing noted that debt and equity offerings would be relied upon to expand the compute capacity of artificial intelligence start-up xAI, adding an element of execution risk to the capital structure.
The divergence between equity and debt valuations highlights the gap between corporate ambition and credit reality. On July 17, CEO Elon Musk responded to a commenter on social media platform X by stating: "I said SpaceX will be worth more than Earth if we achieve our goals." The bond market, however, is currently pricing in a far more terrestrial risk profile.
